Selling insurance telematics to commercial fleets

Jan

Jan Stojaspal

---

6th August 2013

Selling insurance telematics to private motorists is a no-brainer. The less or more responsibly they drive, the more money they save on insurance premiums.

Fleet managers need a bit more education.

They too understand the part about saving on insurance premiums. But what they often fail to consider is uninsured losses, things like vehicle downtime, late-delivery penalties or damage to the brand, which can easily amount to twice the cost of a claim.

As a result, making the commercial sale should be as much about selling insurance cover as about big-picture risk management to mitigate uninsured losses.

“Everybody recognizes the value at this point, but the question is, What’s the ROI?” says Jim Noble, director of global commercial fleet services for Interactive Driving Systems, a company providing risk management services for commercial fleets through data analysis.

Driving the point home

To drive the point home, it also helps to spell out exactly how much product a company has to sell or move to generate enough profit to fund those uninsured losses, said Andy Price, practice leader – Europe, Motor Fleet Zurich Risk Engineering, at Insurance Telematics Europe 2013, a Telematics Update conference in London.

For example, a building supply delivery company worked out that every time a driver clipped a window mirror, the company had to sell 285 bags of cement to fund the associated uninsured losses.

The final piece of the puzzle is making the drivers care. “Unlike your average driver on the street, those who drive professionally for fleets never see an auto insurance bill,” Price said. “So the idea that their behavior behind the wheel could impact premiums is not particularly captivating.

“But mention that their driving performance could affect their standing with their employer? Now you have their attention.  This sort of shift in perspective is what’s needed to make telematics-based insurance policies more appealing to commercial fleets.”

In other words, for consumers, better driving behavior or less driving equal lower premiums. In the commercial world, “[telematics-based insurance] is about fitting in with the operation and what are the value adds, not just measuring speeding, hard cornering and hard acceleration,” Noble explains.

(For more on insurance telematics for fleets, see Insurance telematics and the fleet sector and Fleet telematics: Creating synergies with the insurance industry.)

The foundation is there

Except for fleets not yet equipped with telematics, the foundation for access to all these features has already been laid. “UBI applications are inherent in most [telematics] fleet offerings,” says Roger Lanctot, associate director, automotive multimedia & communications service, Strategy Analytics. “It’s just a question of whether fleet managers want to share that data [with their insurer] or have enough reason to do so,” in exchange for discounts, value-added services and risk management expertise.

The insurers finding success in the commercial marketplace are already onto this. Among them is Zurich Fleet Intelligence (ZFI), which is intended to be a more holistic fleet risk management tool than a simple UBI system, says Christopher Parker, specialty auto consultant in product underwriting for Zurich North America Commercial.

Through analysis of telematics data, driving history, vehicle records and other factors, ZFI offers fleet managers tools to improve efficiency, monitor vehicle use, train drivers and encourage them to improve their skills, assess risk and reduce the likelihood of crashes.

“The benefits achieved through reduced crash rates can be reflected in insurance premiums, as well as less down time, fewer administrative problems, improved morale and, most importantly, lower frequency of injuries to workers and others,” Parker says.

The basics

So what are some of the basics to keep in mind when offering insurance telematics to fleet managers?

· A robust analysis: “You’re not looking at the surface of a driver’s actions but deep into their risk behavior, and what drives it,” Noble says. It’s not enough to note a hard-braking incident. Fleet managers need to know why it occurred. What was the environment? Operational conditions? Does the driver have a history of this? Among the biggest challenges to fleet managers is learning how to digest all the data telematics vendors can supply, Parker notes. “[Insurance] vendors with software programs that leverage data into actionable solutions certainly have an advantage,” he says.

· Operational solutions: Beyond risk management, a successful telematics-based insurance program should offer features like vehicle track-and-trace, onboard inventory management and dynamic dispatch to communicate with drivers, Noble says. Lanctot also notes that, with minimal data, insurance companies could offer suggestions for improved efficiency based on regularly traveled routes, as well as help drivers find fueling or recharging stations. “Options such as equipment tracking and mapping functions to help fleets improve efficiencies seem to be most desirable,” Parker adds, noting that engine performance monitoring, support for highway tax preparation, and delivery and service records for billing are among the other potential uses for telematics data.

· Big-picture insights: Using benchmarks, the program should offer comparisons of fleet behavior to others in similar industries and in like geographic areas, so companies can develop training and goals for improving their drivers’ performance, Noble says.

· Hardware flexibility: Although Zurich offers customers the option of using their web-based ZFI platform, they also have a vendor-agnostic approach to information from telematics service providers (TSPs), Parker says. “A system that allows fleets to choose almost any TSP will not only make the likelihood of such investment more palatable, it can also result in telematics data that are more reflective of the issues of most concern.” And it means that managers of telematics-enabled fleets can more easily opt into a telematics-based insurance program without spending on additional hardware.

Not losing sight of the ultimate goal

It is also important to remember that the ultimate goal (as with consumer UBI) is to impact driver behavior: improve performance and create a company-wide atmosphere of efficiency and safety. “For [professional fleet] drivers, it’s not the insurance premium, but their standing with the company [that matters],” Noble says.

As commercial insurers don’t look at the performance of individual drivers, but at the track record of the fleet as a whole, driving behavior and safety record must become a performance metric for the employee. And the risk management data provided to the company by a TSP, risk management consultant or an insurer with a telematics-based program must be applied in-house as risk-mitigation efforts, with the hopes that the insurer will take notice.

“Underwriters have some degree of latitude when pricing commercial accounts and give consideration to a fleet’s safety management program, including how effectively they utilize telematics data,” Zurich’s Parker says.

UBI no substitute for management support

Still, telematics data is not a magic bullet. Without management support for the analysis and implementation of knowledge gained from risk-management data, there will be limited benefits of having it, according to Price. Managers have to learn from the data and put systems in place to mitigate risk, he explains. They have to talk to their drivers about how to improve outcomes.

“Management support and commitment is one of the key determining factors in whether telemetry is going to be an effective intervention to use within fleets,” he said at Insurance Telematics Europe 2013.

With any luck at all, everyone at the company sees the opportunity in this, and everyone wins.

Jessica Royer Ocken is a regular contributor to TU.

For all the latest telematics trends, check out V2V & V2I for Auto Safety USA 2013 on July 9-10 in Novi, MI, Insurance Telematics USA 2013 on September 4-5 in Chicago, Telematics Russia 2013 in September in Moscow, Telematics LATAM 2013 in September in Sao Paulo, Brazil, Telematics Japan 2013 on October 8-10 in Tokyo and Telematics Munich 2013 on November 11-12.

For exclusive telematics business analysis and insight, check out TU’s reports: Telematics Connectivity Strategies Report 2013, The Automotive HMI Report 2013, Insurance Telematics Report 2013 and Fleet & Asset Management Report 2012.